Retailers and companies selling extended warranties for electrical equipment could soon be forced to give consumers a better deal if recommendations from the Competition Commission are put into force.
Extended warranties have been a contentious issue for a number of years.
Most retailers only sell their own warranties, and rarely present consumers with alternatives.
Many consumers have complained that, as well as being expensive, warranties often fail to provide the 'peace of mind' they are meant to.
The new proposals say retailers should: give customers up to 12 months to cancel warranties; offer annually renewable cover; and cap the amount of commission a salesperson can earn - to crack down on aggressive sales tactics.
The Competition Commission, which has called the £800m warranty industry "a complex monopoly", said the aim of the recommendations was to see if they would encourage competition so that customers get good value for money.
Both the Consumers' Association (CA) and the Office of Fair Trading (OFT) have slammed current arrangements.
The OFT issued an advisory leaflet last Christmas warning people to think carefully before investing in a warranty, and concluded in a separate report that retailers could not be trusted to regulate the sale of warranties themselves.
While the CA acknowledges that some good deals do exist, it said that in too many instances retailers mislead customers. It has welcomed the Commission's report.
"This letter strikes a blow for consumers and makes grim reading for the electrical retailers, who have for too long been peddling extended warranties at over-inflated prices to unsuspecting consumers," said Sheila McKechnie, director of the CA.
Reaction from retailers has so far been low-key. John Clare, chief executive of the Dixons Group, said his company would review the Commission's recommendations.
The retailer said it was "looking forward to meeting with the Commission to comment in detail on their statement".
The nine-month inquiry is now in a consultation phase, with final conclusions due to be published in July.
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